Don't Race Out To Buy Takasho Co.,Ltd. (TSE:7590) Just Because It's Going Ex-Dividend

It looks like Takasho Co.,Ltd. (TSE:7590) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase TakashoLtd's shares before the 17th of January in order to receive the dividend, which the company will pay on the 11th of April.

The company's next dividend payment will be JP¥5.00 per share, and in the last 12 months, the company paid a total of JP¥5.00 per share. Based on the last year's worth of payments, TakashoLtd has a trailing yield of 1.1% on the current stock price of JP¥468.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether TakashoLtd can afford its dividend, and if the dividend could grow.

View our latest analysis for TakashoLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. TakashoLtd reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If TakashoLtd didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the past year it paid out 119% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Click here to see how much of its profit TakashoLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. TakashoLtd was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TakashoLtd has seen its dividend decline 12% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

We update our analysis on TakashoLtd every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Should investors buy TakashoLtd for the upcoming dividend? It's hard to get used to TakashoLtd paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not that we think TakashoLtd is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in TakashoLtd despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 1 warning sign for TakashoLtd that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.